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Bank of America has reported a sharp rise in profits for the first quarter of 2013 after it shed costs and set aside less money for bad loans.
Bank of America reported a net income of $2.3 billion in Q1 2013, after making $328 million in the last year’s same quarter.
Over the year the company has taken costs of $1 billion out of the bank, helped by 16,000 job cuts.
Also helping was a fall in the amount the bank set aside for bad debts – provisions were $1.7 billion, about a third lower than last year’s figure.
Bank of America is the latest US bank to report higher first quarter profits, with some having made record earnings.
Investment banking helped JP Morgan and Goldman Sachs, while Citigroup and JP Morgan, in common with Bank of America, both cut loan reserves.
Cost cutting was another common theme among the big banks.
Bank of America has reported a sharp rise in profits for the first quarter of 2013 after it shed costs and set aside less money for bad loans
Bank of America itself plans to have lowered costs by $8 billion by 2015, and it said another $1.5 billion of cost cuts would be in place by the end of 2013.
Leaving the one-off gains aside, Bank of America’s income from mortgages and income from trading in the fixed income, currency and commodities markets were both lower.
The weaker underlying performance sent the company’s shares lower on Wednesday, ending down 4.7%.
The bank’s chief executive, Brian Moynihan, said he was pleased with its performance: “Our strategy of connecting our customers to all we can do for them is working.”
Bank of America, along with two of its big four rivals, also pointed to income from investment banking as a positive contribution to earnings.
Brian Moynihan added: “Solid increases in loan growth to small businesses and middle-market companies, four straight quarters of steady growth in mortgage originations, record earnings in wealth management, and another quarter near the top in investment banking fees show we are balanced, focused and moving forward.”
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Goldman Sachs has reported a 7% rise in its profits during Q1 2013 following a strong performance in its investment banking division.
The company made $2.26 billion net profits, a 7% rise comparing with Q1 2012.
The investment banking division made $1.57 billion, a 36% rise, during the period.
Goldman Sachs’ total revenue rose just 1% to $10.1 billion. The figures were ahead of analysts’ expectations.
Earnings at the company’s equity arm fell 15% to $1.92 billion, which mostly reflecting a slowdown in trade executions and volumes on behalf of its clients.
Goldman Sachs has reported a 7 percent rise in its profits during Q1 2013 following a strong performance in its investment banking division
“We are pleased with our performance for the quarter,” said Lloyd C Blankfein, chairman and chief executive.
“Our strong client franchise across our businesses drove generally solid results.
“Still, the potential for macro-economic instability was felt in the quarter and constrained overall corporate and investor activity. We continue to be very focused on controlling our costs and efficiently managing our capital.”
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JPMorgan Chase has raised its estimate of the value of its recent losses from trading in complex financial derivatives to $4.4 billion.
The US bank said the executives responsible had been dismissed without severance pay and the bank would be clawing back two years of their pay.
When it first announced the loss in May, it said it had lost at least $2 billion.
The bank also said it had found evidence that some traders may have been trying to hide their losses.
The bank said it would restate its results from the previous three months because it had made $459 million less than it thought.
It blamed the restatement on the fact that “certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter”.
JPMorgan Chase has raised its estimate of the value of its recent losses from trading in complex financial derivatives to $4.4 billion
Despite those losses from its chief investment office, the bank reported three-month net profit of $4.96 billion, down 8.7% from the same period last year. JPMorgan’s shares opened up 3% in New York.
Chief executive Jamie Dimon said he had closed the division of the bank responsible for the losses and moved the remainder of the trading position to its investment banking division.
The executive in charge of the closed division, Ina Drew, left the bank in May, days after the losses were announced.
Before Friday’s gains, JPMorgan had lost about 15% of its market value since the losses were first announced.
It also said that it expected another $700 million to $1.7 billion of losses from the derivatives trading.
Responding to questions from analysts following the release of results, Jamie Dimon said: “I think it’s silly for anyone in the business world to think you’re not going to make mistakes.”
“It is not possible in the real world. I just think the mistakes should be smaller, fewer and far between, this being an exception.”
Another bank with rising shares on Friday was Wells Fargo, which was also reporting results.
It posted second-quarter net profits of $4.6 billion, up 17% from the same period last year.
Its profits from mortgages were up to $2.9 billion from $1.6 billion last year.
Wells Fargo is the fourth-biggest US bank and the biggest mortgage lender.
The results came the day after it paid $175 million to settle allegations from the Justice Department that during the housing boom, it had charged higher rates and fees to African-American and Hispanic customers.
Wells Fargo said it had settled to avoid a long legal battle.
Deutsche Bank reports a sharp fall in profits, in part due to weaker performance in investment banking during the eurozone debt crisis.
Net income for the first three months of the year was 1.4 billion Euros ($1.9 billion), down 35% on the 2.1 billion Euros the bank made a year earlier.
Revenue was down 12% at 9.2 billion Euros.
The bank said although the business environment was “more stable” than at the end of last year, it was “far less favorable” than a year earlier.
Deutsche Bank reports a sharp fall in profits, in part due to weaker performance in investment banking during the eurozone debt crisis
Germany’s biggest bank also took a 257 million Euro hit after writing off its holding in pharmaceutical company Actavis.
Revenues at the bank’s investment banking division fell 8% to 6.2 billion Euros, while those at the asset management arm dipped 17% to $3.4 billion.
Postbank, Deutsche’s retail arm, also reported lower revenues due to low interest rates and a move to reduce risk across its operations.
“This is a strong result which reflects good performance across most businesses, despite continued risk discipline and lower client activity than in the prior year,” the company said.
Investors, however, appeared to disagree, with Deutsche shares closing down 3.7% in Frankfurt.
The bank said it had focused on consolidating its position and building up its reserves.
“We continue to pursue our strategy of reducing legacy risks and strengthening our capital position, as evidenced by our disposal of Actavis,” said chief executive Josef Ackermann.
Europe’s top banks have been hit hard by the eurozone debt crisis, which has undermined investor confidence and hit trading volumes, which has knocked investment banks’ revenues and, therefore, profits.
